Understanding the new pre-notification requirement for R&D claims
Research & development (R&D) tax credits offer valuable relief to businesses investing in innovation; however, those doing so need to be aware of recent changes to the regime. HMRC has introduced new disclosure requirements for companies making claims, and failure to comply with these could mean missing out on this generous tax break.
The requirement for new claimants to provide advanced notification of the intention to claim has fallen under the radar amongst the bigger changes which have recently been introduced.
Below, we provide a breakdown of exactly who, when and how to submit the pre-notification, as well as other key information about the process.
Who does this apply to?
The pre-notification requirement applies specifically to new and infrequent claimants of R&D tax relief. Businesses must pre-notify HMRC if they:
- Are claiming R&D tax relief for the first time.
- Have not submitted an R&D claim in the three years prior to the pre-notification deadline.
This requirement applies to businesses under both the Research and Development Expenditure Credit (RDEC) and the Small and Medium-sized Enterprises (SME) regimes, and it will continue to apply following the merging of the schemes for accounting periods starting on or after 1 April.
When to submit pre-notification?
This new rule came into effect for accounting periods beginning on or after 1 April 2023.
The deadline for submission of the notification form is six months after the end of the accounting period for which a business wishes to make an R&D claim.
For example, if a business’s accounting period runs from 1 January 2024 to 31 December 2024, the notification window opens on 1 January 2024 and closes on 30 June 2025.
Missing the deadline means the R&D claim for that period will be invalid and automatically withdrawn by HMRC when the tax return is filed.
What you need to know about the process
The pre-notification is made through an online HMRC portal and can be completed by a business or its R&D agent. The information you will need when completing the portal consists of:
- Company’s unique tax reference (UTR): This is a straightforward requirement that identifies the company to HMRC.
- Senior officer’s details: You will need to provide the name and contact details of the senior officer responsible for the claim. This does not necessarily have to be a company director but should be someone who oversees the company’s R&D activities, such as the head of finance or CTO.
- R&D agent’s details: If the claim involves an R&D agent, their name and contact details must be included.
- Accounting period dates: The start and end dates of the accounting period for which the claim is being made.
- Summary of R&D activities: The final piece of information required is a high-level summary of the activities the company plans to undertake. This should outline how the intended projects meet HMRC’s definition of R&D for tax purposes. There is no set structure for this narrative but it must be kept to less than 10,000 characters.
Other considerations
If a business’s accounting period is shortened or lengthened, the pre-notification submission deadline remains six months from the end date of the accounting period. For lengthened periods, although the claim will be split between two tax returns, only one pre-notification form is required.
For example, if a business’s accounting period runs from 1 January 2024 to 31 March 2025, the notification window opens on 1 January 2024 and closes on 30 September 2025
It is common for businesses to assess their R&D activity when looking at their tax return for the period; with the introduction of this form, it is wise to initiate conversations around R&D early enough to avoid missing the notification window. It would be a substantial loss if a business missed out on claiming simply because they did not know about this new administrative step.
What remains unchanged is the fact there is still a two-year window from the accounting period end to make an R&D claim.
HMRC has published information on which sectors there is unlikely to be R&D activities, including care homes, wholesalers and retailers, and pubs and restaurants. Please seek the support from an expert in the field of R&D tax relief to support in determining whether your projects qualify – whether in an “obvious” sector or not.
Submitting a pre-notification form does not obligate a company to make a claim, but it does keep the option open and avoid missing out.
We are here to help
We are here to ensure your business maximises its R&D opportunities while staying compliant with the latest regulations. If you have any questions about submitting a pre-notification form, determining your business's eligibility for R&D tax credits, or anything discussed above, please get in touch with Liz Egan-Evans via the form below, one of our other R&D specialists, or your usual Azets advisor.